Market Updates | 3rd September 2021
The pandemic is accelerating the pace of change right across the professional services sector, amplifying pre-crisis trends as well as triggering entirely new ones. We’ll be keeping tabs on these over the coming months: We’ll be reporting back on what clients are telling us and how we see different segments of the professional services sector perform, as well as highlighting emerging opportunities and challenges. As always, we’ll be taking a fact-based approach. Our market sizing data comes from our unique model of the professional services sector, with more than $1tn of revenues broken down by sector, geography, and capability. Our forecasts are constantly updated to reflect the latest market data we have available from firms and their clients. Client data comes from our rolling programme of quantitative research and interviews.
Trying to solve the consulting industry’s value problem
Across much of the consulting industry, there’s a renewed focus right now on the question of value.
This isn’t a new problem: For as long as we’ve been analysing clients’ perceptions of the consulting firms they work with, the “value-quality gap” has been a consistent feature of the industry. Clients, are, on the whole, positive about the quality of work delivered by their consultants; they believe that their project teams are staffed with smart, capable individuals who put hard work into creating high-quality deliverables. Those same clients, however, are more sceptical when it comes to whether that work is generating a positive return on investment. In our latest data only 43% of clients felt they could confidently say that the value generated by their consulting projects measurably outstripped the cost put into them.
This does not mean that the majority of clients think that value is being destroyed by their consulting engagements. Rather, it suggests that most clients have a transactional view of consulting. They see it as a necessary cost of doing business—a service where the value you get out corresponds on a one-to-one basis with the resources you put in.
Although this issue is not a new one, the need for consultants to address it has become more acute over the past 18 months. As a result of the pandemic, it’s now harder than it’s ever been for consulting firms to break into new accounts. Clients have responded to the uncertainty of COVID by showing a stronger preference to buy exclusively from incumbent service providers; 68% say that, since the onset of the pandemic, they’ve become less likely to buy services from firms they don’t already have a relationship with.
This poses a problem for consulting firms of all sizes, but especially smaller firms that don’t already have large, established client bases from which to generate revenue. To overcome the incumbency advantage that has been entrenched by the pandemic, consultants will have to find a way of setting themselves apart from the crowd. One of the most effective ways that a firm can do that is by creating a clear and compelling narrative about the ability of its consultants to create stakeholder value.
To create those kinds of narratives, consultants will need to develop a more precise definition of what value means in the context of the consulting industry. This definition should not be monolithic in nature; each client has their own understanding of what value means, which reflects the different reasons that drive them to purchase consulting services in the first place.
When clients turn to consultants, they do so not only because they want to achieve a specific outcome, but because they want to achieve that outcome in a way they wouldn’t be able to using their own internal resources. Our research suggests that there are five “dimensions of value” which collectively capture the full range of different reasons clients use consulting services. Once a consulting firm has embraced a definition of value that encompasses all of these dimensions, it then becomes possible for that firm’s leaders to start asking themselves more meaningful questions: What type of value matters the most to our clients? What type of value are our consultants best at creating? Which dimensions of value do we want our brand to be associated with?
The five dimensions of value
|Dimension of value||Definition|
|Better||Consultants help us to produce better project outcomes than we would be able to achieve ourselves|
|Easier||Consultants simplify the project delivery process and make it easier for us to make important decisions|
|Faster||Consultants help us to achieve results faster than we could ourselves|
|Cheaper||Using consultants is less expensive than completing projects with internal resources or using other types of service providers|
|Safer||Using consultants minimises the risks associated with the project|
Once they have answered these questions, firms will need to ensure that a value-driven philosophy is embedded into every stage of project scoping and delivery. To achieve that, many firms have encouraged their account managers to become more proactive in talking about the subject with clients—elevating project scoping discussions from the level of “what do you want us to do?”, to that of “what type of value do you want us to create?”. In some cases, this philosophy may even lead firms to turn down work where there isn’t a clear opportunity to add value.
Once those conversations have taken place at the scoping stage, that should then equip project teams with the information needed to identify the metrics they need to track over the course of the engagement. Increasingly, firms are also realising that this tracking exercise ought to outlive the project itself. In the past, it was common to hear complaints from clients about consultants who would leave them with a set of high-quality deliverables, but without the institutional knowledge to continue getting value out of them after the project was over. To avoid that, some firms have started to become more proactive about providing clients with post-project support and working with them to ensure that the work they deliver is generating sustainable and lasting value.
While this conversation about value is one that has been taking place within the industry for multiple years, the pandemic has elevated it to a new level of importance. The firms that are most likely to find long-term success in a post-COVID professional services market are going to be the ones that know exactly what type of value they’re trying to create for clients, and how to embed that knowledge in the set-up and the day-to-day management of their projects.
We've just published a white paper exploring the value problem in more detail. Download a copy here.